FCA Issues First MiFID II Consultation Paper
The FCA issued its first MiFID II consultation paper (CP 15/43) on 15 December 2015, principally on issues related to secondary market trading of financial instruments. The matters under consultation included proposed new rules and changes to existing rules governing:
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Trading Venues – including regulated markets, multilateral trading facilities (MTFs) and a new type of trading venue, the organised trading venue (OTF) – including in:
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The Recognised Investment Exchanges sourcebook (REC).
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The rules for MTFs in chapter 5 of the Market Conduct sourcebook (MAR).
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New rules for OTFs in a new chapter 5A of MAR.
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Systematic Internalisers.
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Transparency, including pre-trade transparency waivers and post-trade transparency deferrals.
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Reporting of market data.
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Algorithmic and high frequency trading requirements.
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Passporting and UK branches of non-EEA firms.
The FCA noted that some of the points in the consultation may be impacted by forthcoming EU legislation and guidance that is as yet unpublished.
FCA Thematic Review of Suitability of Investment Portfolios
The FCA published a thematic review report (TR15/12) on the suitability of discretionary and advisory investment portfolios managed for retail customers by a sample of wealth management and private banking firms on 9 December 2015. The review also considered the firms' governance and control environment.
The FCA assessed 150 randomly selected client files from 15 firms and found that:
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23% indicated a high risk of unsuitability;
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37% were unclear, in that there was insufficient information for the FCA to make an assessment or the information presented was inconsistent or confusing; and
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41% showed a low risk of unsuitability.
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These results were an improvement from the position found in the FSA’s previous work on suitability in 2011, where the proportion of high risk or unclear files was 79%.
The report included a specific list of good and poor practice observations.
The FCA said that all firms providing discretionary and advisory portfolio management services to retail customers should review the report’s findings, consider whether any of the issues the FCA identified apply to their own businesses, and take action where necessary.
